India will allow local companies to merge with overseas firms, easing rules to help home-grown businesses restructure their expanding global operations, and pave the deck for more listings of securities on capital markets abroad.
"Until now, only inbound mergers were permitted. With outbound mergers now permissible, there would be a lot of opportunities for Indian companies to acquire, restructure, or list on offshore exchanges as well," said Mehul Shah, a partner at Khaitan and Co.
Until the federal notification by the corporate affairs ministry on April 13, India had permitted only inbound mergers. The merger would be in compliance with the Companies Act, 2013, and require prior approval of the Reserve Bank of India (RBI).
The notification also lists certain jurisdictions on the foreign companies, covering countries that comply with rules such as being members of the Financial Action Task Force (FATF) and whose central banks are members of the Bank for International Settlements (BIS).
Experts, however, believe that certain related laws must be amended before these rules take effect. "There would be need to have clarifications under tax laws. Exchange control regulations need to be relooked and clarified to give effect to this notification. Also, an obligation is cast on RBI to provide approval for these mergers, as today, the RBI does not have mechanisms in place for this," Shah added.
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